Microsoft – Digital work land grab

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Microsoft moves to cement Office’s dominance.

  • Microsoft is moving to tighten its grip on the Digital Work ecosystem before anyone else can really get a decent foothold.
  • Digital Work is the professional equivalent of Digital Life and describes the digital activities undertaken by users in the workplace and is measured by the amount of time each user spends engaged in activity.
  • One of the pillars of the Microsoft ecosystem is the marriage of Digital Life and Digital Work in a seamless way.
  • Given its dominance of Digital Work, this is a proposition that only Microsoft can make and in my opinion is a key differentiator.
  • However, Microsoft must remain dominant in this space and this is what all of the recent moves have been about.
  • These moves include:
    • Microsoft has now made it possible to create and edit Office documents on iOS and Android even without an Office 365 subscription. Some advanced features are only available for paid Office 365 users but these are unlikely to be required by the majority looking to do basic editing.
    • Updating its Office offering such that Word, Excel and PowerPoint work much better on iPhone, iPad and Android and committing to further regular updates.
    • Offering Office 365 subscribers unlimited OneDrive cloud storage.
    • Doing a deal with Dropbox to tightly integrate its online storage service into Office.
  • I think that there is one motivation behind all of these moves.
  • I believe that Microsoft wants to make Office so accessible, easy to use and useful that no one can be bothered to use anything else.
  • I also think that at the end of the day, the vast majority of creation and editing of office documents is going to remain on a device equipped with a keyboard and a mouse.
  • Touch based editing is fine for small refinements and proof reading but it is very clumsy and painful for detailed editing and for long typing sessions.
  • Consequently, I think it unlikely that Microsoft is going to lose meaningful Office revenues due to these changes.
  • On the contrary, it might actually gain as users are introduced for free and when they need to do more in depth work, they are more likely to become paying users.
  • This also creates a disincentive to use the inferior Google Docs or Apple iWork.
  • Microsoft is breaking with traditions of its past an adopting the models that are currently working with success in the Internet which is an extremely good sign.
  • This reinforces my hopes that Nadella’s vision of Microsoft as an ecosystem company if filtering down to the rank and file and that execution will be quick.
  • There is still a lot to do but all the signs are there that something new is emerging in Redmond.
  • Microsoft remains one of favourite places to invest (alongside Google and Apple) in the digital ecosystem.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.

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